Under Florida law, shares of ownership in a corporation are subject to attachment by creditors of the shareholder. Fla. Stat. §76.02 (2011). As a result, shareholders in a family owned corporation can be forced to share ownership and control with ex-spouses and/or creditors of a family member. In cases where there is only one shareholder in a corporation, this can result in the creditor, who as all the ownership and control in the corporation, liquidating the corporate assets and the shareholder losing his job.
Unlike ownership interest in a corporation, membership interests in a limited liability company are subject to a charging order, meaning that a creditor of the member is not entitled to obtain ownership interest in the company. Instead, the creditor is limited to receiving the distributions that the debtor member is entitled to receive. §608.433 (5) and (8) (2011). In instances where there is only one member of the company, the charging order still applies; however, Florida statute does allow the creditor to petition the Court and, upon a showing that the creditor will not be paid within a reasonable amount of time, receive the membership interest in the company. Fla. Stat. §608.433(6) (2011).
Because of the asset protection benefits associated with limited liability companies, and depending on the specific circumstances of each case, it is generally recommended that clients currently owning shares in a Florida corporation undertake the process of converting to a Florida limited liability company.
[author] [author_image timthumb=’on’]http://www.bretjonespa.com/main/wp-content/uploads/2012/06/BJones-90-86-square.jpg[/author_image] [author_info]An intensely critical thinker, Attorney Cazobon focuses on the facts and the application of the law to the acts, rather than through social needs or media. Attorney Cazobon is one of the significant reasons that Bret Jones, P.A. rarely does “basic” estate plans but rather customized and creative means to accomplish a client’s personal goals whether those be short-term, long-term, tax-related, or part of an overall business or life plan.[/author_info] [/author]